Penned by one of our expat Australian correspondents and their view of the Australian cannabis “market” through the prism of a industry that operates, however imperfectly, in North America.
Our writer asks if it is time for a new generation of leaders in the Australian cannabis “industry”.
As with many other if not most areas of Australian life at the moment we’d suggest it isn’t a radical ask just a necessary one.
With the global cannabis marketplace settling into a state that might resemble stability, and with more and more US states passing legislation to decriminalize, it is fair to say that some of the stigma around the noble green plant is starting to subside.
From the Boom that was 2018 in cannabis markets, with valuations soaring, companies sprouting and scrambling to obtain licenses, it was like frontier times in the early days, and a mad land grab was taking place.
As things have settled a little, the spotlight has now come to shine on whether or not these companies can be profitable. Sure; we’ve lost a few along the way, and we’ve seen more mergers than most people can remember. But the industry continues to grow, employ and serve those who wish to purchase.
That is in North America and Europe of course where companies are increasing sales revenues and slooooooowly decreasing or lowering cash burn rates.
Companies like Canopy Growth and Hexo start ventures or gain investment from well-established beverage companies like Constellation Brands, or Molson Coors and the overall sense of acceptance is increasing.
In a faraway land that is Australia, things are a little different. To the novice and impartial bystander, we are seeing a lot of folks espousing grandiose figures and “projected revenues” that the very largest markets of Europe and North America have yet to realize.
It might be unbridled optimism for the future ahead and the immense upside of a new commodity market, or we might actually look at a more plausible reality.
A lot of these folks just don’t know what they are doing.
Cann Group have now raised over $200m via the markets or via lenders, and still do not have a completed site. It has become such an issue that they’ve come out publicly to try and “insist that their shareholders will be rewarded for their patience”.
All well and good to build a $160m million-dollar facility with the idea of selling to Aurora, when Aurora itself is closing or suspending production on their own new sites and divesting in Cann Group.
Expenses are high, executive compensation is likely higher and this is after culling half of the workforce in 2019. It seems they might not have learned anything.
Cannatrek obtained permission to build a facility that was somehow going to produce $400m worth of medical cannabis for a market that is growing at a glacial pace. Further to this, it was around the time of the announcement, that their parent company, CannTrust, was stripped of their license by Health Canada.
LeafCann too came along and promised the South Australian Government glorified numbers around production and revenue from the state. Not sure how that adds up, aside from getting a nice photo op with the premier.
Shout out to Little Green Pharma who are doing things differently and deserves kudos. Well done team, your acquisition of a world class production facility in Denmark puts you at the top of the pile in terms of legitimate companies. You’ll actually produce and sell cannabis. Seems buying was more effective than building in this case.
Good thing Covid offered the most widely accepted excuse we’ve likely seen in our lifetime.
If this article had to pose one question and a bit of food for thought, it’d be this.